October 22, 2014

Though Difficult, a Grand Bargain Is Still Possible

  • The federal budget is an expression of our country's values. Where we choose to spend and at what levels, how and who we tax, and the borrowing we...

Recent developments in Washington have demonstrated both the difficulty of achieving a grand bargain on fiscal reform and why it may still be possible.

It became apparent last week that the House and Senate have made no progress on resolving their differences over Fiscal Year 2014 appropriations. (See next story for details.)

Meanwhile, President Obama floated a new kind of “grand bargain”: one aimed at short-term job creation rather than long-term fiscal sustainability. But his speech on the subject broke no new ground, essentially proposing to pay for a package of jobs programs with “transition revenue” from base-broadening corporate tax reform ideas that he proposed last year.

Robert L. Bixby, executive director of The Concord Coalition, points toward two main problems with Obama’s proposal: “It would remove corporate tax reform from the mix of options that could be used to help strike a long-term deal, decoupling it from individual tax reform, and it would require all the political pain of corporate tax reform for no gain in long-term deficit reduction.”

Republicans quickly dismissed the President’s proposal. But shortly after the speech he met with eight GOP senators who are still interested in a “go big” grand bargain that would replace the sequestration cuts and perhaps move further towards a fiscal sustainability plan.

With no funding plan yet adopted for the fiscal year that begins Oct. 1 and the debt limit looming shortly after that, Bixby says, “an agreement of some sort will have to be reached soon after Congress returns from its August recess. The issues are so intertwined that a comprehensive grand bargain is still the best way to resolve them.”